GAIL's new integrated natural gas pipeline tariff hiked by 45%
GAIL has been struggling in recent years due to the lack of tariff hikes and the rise in costs.
The new tariff of Integrated Natural Gas Pipeline of GAIL (India) Ltd. would be Rs. 58.61/MMBtu, which is 45 percent higher than the current tariff.
This has been a topic of discussion for some time, with GAIL having asked for a tariff hike of 70 percent. This is in line with the Rs 60.9/MMBtu proposed by the Petroleum and Natural Gas Regulatory Board (PNGRB).
This news is in line with analyst expectations, with CLSA having a "buy" rating on GAIL and setting a target of Rs 125 per share. The indication from the regulator that the tariff may be increased by over 50 percent had raised hopes of a significant tariff hike.
CLSA estimated that a 40 percent hike would be the base case, while a 52 percent hike would boost the next year's Earnings per Share (EPS) estimate by 7 percent. A higher share of stable utilities earnings would also drive a re-rating of GAIL's stock. The increase in tariffs would lead to higher revenues for GAIL and improve the company's profitability.
GAIL is one of the largest natural gas processing and distribution companies in India, with a pipeline network spanning thousands of kilometers across the country.
The company has been struggling in recent years due to the lack of tariff hikes and the rise in costs. The proposed tariff hike comes as a much-needed relief for the company, and it is expected to have a positive impact on its financial performance.
The natural gas industry in India has been growing steadily, with the government's focus on increasing the share of natural gas in the energy mix. The increase in tariffs is expected to encourage more investments in the sector, and it is likely to boost the growth of the natural gas industry in the country.
The tariff hike is also expected to boost GAIL's financial performance and drive investments in the sector.
Shares of GAIL are off the day's low, currently trading little changed at Rs 105.20.
(Edited by : Hormaz Fatakia)
First Published: Mar 22, 2023 3:00 PM IST
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